# O&P (Overhead and Profit)

Overhead and Profit (O&P) is a 20% markup (10% overhead + 10% profit) added to an insurance estimate when a general contractor manages multiple trades on a single claim. O&P is built into Xactimate as an industry-standard calculation and is supported by most state insurance departments.

## The $4,000 Line Item Carriers Love to Deny

**Overhead and Profit (O&P) is a 20% markup - consisting of 10% overhead and 10% profit - added to an insurance estimate when a general contractor manages multiple trades, and carriers fight it on nearly every claim.** On a $20,000 roof replacement, O&P equals $4,000. On a $40,000 storm damage claim with multiple trades, it equals $8,000. [Xactimate](/content/resources/glossary/xactimate/index.html) has O&P built in as a standard calculation, yet carriers routinely strip it from estimates, claiming the contractor is "self-performing" and does not qualify. Understanding when O&P applies and how to defend it is one of the highest-value skills in insurance restoration.

## When O&P Applies

**The [three-trade rule](/content/resources/glossary/three-trade-rule/index.html) is the industry standard.** When a general contractor manages three or more distinct trades on a single claim, O&P should be included. [Xactimate's](/content/resources/glossary/xactimate/index.html) own documentation supports this, and most state insurance departments recognize it.

| Trades on the Job                     | O&P Eligibility                        | Example                               |
|---------------------------------------|---------------------------------------|---------------------------------------|
| 1 trade (roofing only)               | Typically denied                      | Shingle replacement only               |
| 2 trades (roofing + gutters)         | Arguable, carrier-dependent           | Roof + gutter replacement              |
| 3+ trades (roofing + gutters + painting) | Industry standard = O&P included      | Full exterior restoration              |

Make sure each trade is assigned to its own [trade group](/content/resources/glossary/trade-groups/index.html) in Xactimate. Bundling multiple trades under one group gives the carrier ammunition to deny O&P.

## How Carriers Deny It

**Know the playbook so you can counter it.** Carriers deny O&P using three main arguments: the contractor is self-performing (not subcontracting), the trades are "related" (roofing and gutters are "the same thing"), or the job does not meet the three-trade threshold. The defense is documentation. Keep subcontractor invoices, assign trades to separate [trade groups](/content/resources/glossary/trade-groups/index.html), and cite the state insurance department's position on O&P in your [supplement](/content/resources/glossary/supplement/index.html).

Some carriers have internal guidelines that automatically strip O&P unless the adjuster manually adds it. That means O&P is missing by default on their initial [scope of loss](/content/resources/glossary/scope-of-loss/index.html), and recovering it falls entirely on your supplement.

## O&P Math on a Real Claim

**O&P is calculated on the net claim, not including the [deductible](/content/resources/glossary/deductible/index.html).** On a $25,000 RCV estimate:

- 10% overhead: $2,500
- 10% profit: $2,500
- **Total O&P: $5,000**

That $5,000 is the difference between a profitable job and a break-even job. For [public adjusters](/content/resources/glossary/public-adjuster/index.html) working on contingency, recovering O&P directly increases their fee. For contractors, it is margin you earned by managing the project. Do not leave it on the table.

## Frequently asked questions

How much is O&P on a typical roof replacement?

O&P on a $20,000 roof replacement is $4,000 (10% overhead + 10% profit = 20%). Carriers deny it constantly, usually claiming the contractor is self-performing and not managing subcontractors.

When should O&P be included in an estimate?

O&P should be included when a general contractor manages multiple trades on a single job. The three-trade rule is the standard: if the job requires roofing, gutters, and painting (three trades), O&P should be included.